Gary Gensler Needed At SEC, MIT Economics Expert Argues

The Wall Street Journal editorial page calls US SEC Chair Gary Gensler’s approach “fast and furious,” claiming that writing too many rules is undermining investor protection. Leading industry representatives argue that the comment period on proposed rules is too short.

Photo Insert: Gensler’s principles are clear and fairly consistent.

And The Economist has implicitly accused him of hubris, snarkily asking, “Can Gary Gensler Solve Every Problem in American Finance?” In short, big business wants Gensler out, Simon Johnson recently wrote for Project Syndicate.

None of this criticism makes any sense, because it ignores how little was achieved by Gensler’s predecessors.

The rules governing securities markets in the United States have been allowed to slip over the past dozen years, enabling some dangerous practices to take root. Gensler and his colleagues are indeed working fast and furiously, but primarily to help markets from becoming massively unfair.

According to The Economist, Gensler’s team has proposed more rules in his first 18 months than did his three predecessors, Jay Clayton, Michael Piwowar, and Mary Jo White. By itself, this is an entirely meaningless statistic. The real question is: what is the problem to be solved, and is the SEC doing its job?

The 2008 global financial crisis exposed some major weaknesses in US financial markets. The Dodd-Frank financial reforms of 2010 were designed to fix some of the problems, but, under White, the SEC implemented them at a glacial pace.

Under Clayton and Piwowar, regulation influenced by the SEC became more permissive, sliding back toward the “anything goes” days of the early 2000s – which contributed to the madness of the 2007-08 boom-bust cycle.

Gensler’s principles are clear and fairly consistent. As even The Economist concedes, ever since Gensler was chair of the Commodity Futures Trading Commission (CFTC) in 2009-14, he has stood for a level playing field on which financial-industry insiders are required to treat customers fairly.

Looking back over Gensler’s long career, as a political adviser, and at the US Treasury, he has been consistently skeptical of opaque practices or efforts to dodge disclosing material information.

The first part of Gensler’s career was at Goldman Sachs, so he brings an ex-insider’s experience to all these issues.

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